Assignment 1 BFIN 386 - BFIN 386 PDF

Preview

Summary

BFIN 386...

Description

Assignment 1: Portfolio Drift & Re-balance / Asset Allocation 75237.90 By Bryan Johnson 1. Look up each fund’s performance from Jan. 2009 to September 2017 and calculate the dollar balance now in each fund as well as the annually compounded rate of return per fund (14 Marks)  CIBC CANADIAN BOND (CIB476) Dollar Balance = 14541/10000=1.445x6500=9393.15 o Rate of return = 4.30%  CIBC GLOBAL BOND INDEX (CIB511) Dollar Balance = 11337/10000=1.1337 x 6500= 7369.05 o Rate of return = 1.44%  MAWER NEW CANADA (MAW307) Dollar Balance= 44,327/10,000= 4.433x6000= 26,598 o Rate of return = 18.55%  TD HEALTH SCIENCES (TDB976) Dollar Balance= $45699/10000= 4.5699x 1500 =6854.85 o Rate of Return = 18.96%  MACKENZIE US MID-CAP GROWTH (MFC1564) Dollar Balance= 29480/10000= 2.948x1000= 2948 o 13.15%  TD ENTERTAINMENT & COMMUNICATIONS (TDB652) = Dollar balance 52364/10000= 5.2365x4000= 20946 o Rate of return= 20.83%  CIBC EMERGING MARKETS INDEX (CIB519) Dollar Balance 22,037/10000= 2.204x 500= 1101.85 o Rate of return= 9.45% 2. Compute the annually compounded return for the portfolio as a whole = 12.91 3. Calculate the simple average weighted return per fund within the portfolio and comment as to why the portfolio return (calculated in #2) is different than the sum of the weighted average returns of the funds that make up the portfolio  CIBC CANADIAN BOND (CIB476) Simple Average Weighted return = 6500/26,000= 25%, 4.30% of 25%= 1.075%  CIBC GLOBAL BOND INDEX (CIB511) Simple Average Weighted return= 6500/26,000= 25%, 1.44% of 25%= 0.36%  TD HEALTH SCIENCES (TDB976) Simple Average Weighted return = 1500/26,000= 5.769%, 18.96% of 5.769%= 1.094%  MACKENZIE US MID-CAP GROWTH (MFC1564) Simple Average Weighted return = 1000/26,000= 3.846%, 13.15% of 3.846%= 0.506%  MAWER NEW CANADA (MAW307) Simple Average Weighted return= 6000/26000= 23.077%, 18.55% of 23.077= 4.280%  TD ENTERTAINMENT & COMMUNICATIONS (TDB652) Simple Average Weighted return= 15.385%, 20.83% of 15.385%= 3.205%  CIBC EMERGING MARKETS INDEX (CIB519) Simple Average Weighted return= 500/26,000= 1.923%, 9.45% of 1.923%= 0.181%

Total Simple Average Weighted return= 10.70% The Simple Average Weighted will be less than the total rate return because the simple average breaks down the fund into the % of how much money was invested which was 26,000. 4. Calculate the portfolio’s original and current average weighted MER  CIBC CANADIAN BOND (CIB476) o Original:6500/26,000= 25% x 1.25%= 0.313% o Current average: 9393.15/75,210.90= 12.489% x 1.25%= 0.156%  CIBC GLOBAL BOND INDEX (CIB511) o Original: 6500/26,000= 25% x 1.20%= 0.30% o Current: 7369.05/75210.90= 9.798%% x1.20%=0.118%  MAWER NEW CANADA (MAW307) o Original: 6000/26,000= 23.077%x1.40%= 0.323% o Current: 26,598/75210.90= 35.635%x1.40%= 0.495%  TD HEALTH SCIENCES (TDB976) o Original: 1500/26000= 5.769% x 2.82%= 0.163% o Current: 6854.85/75210.90= 9.114% x 2.82%=0.257%  MACKENZIE US MID-CAP GROWTH (MFC1564) o Original: 1000/26,000= 3.846% x2.60%=0.100% o Current: 2948/75210.90= 3.920% x2.60%= 0.102%  TD ENTERTAINMENT & COMMUNICATIONS (TDB652) o Original 4000/26,000= 15.385 x 2.82%= 0.433% o Current: 20,946/75210.90= 27.850% x 2.82%= 0.785%  CIBC EMERGING MARKETS INDEX (CIB519) o 500/26,000= 1.923% x 1.20%= 0.023% o 1101.85/75210.90= 1.465% x 1.20%= 0.026%  Total Original =1.655%  Total Current= 1.80%  The Current MER will be greater than the original because the fund has grown and it’s more diversified. So, there will be a bigger pool of money to manage. 5. Limiting the asset classes to either fixed income and / or equity, use each fund’s Asset Allocation (as at the most recent update) to determine the portfolio’s current FI / EQ asset mix  FI = 22.287%  EQ= 77.713 6. Determine which specific BUY & SELL transactions should be done with respect to the portfolio and the new purchase of $10,000 such that the original (fund specific) asset allocation is regained  CIB476 :6500+10,000= 16,500x50% = 8250 SELL  CIB511 6500+10,000= 16,500x50% = 8250 BUY  MAW307 6000+10,000= 16,000x50% = 8000 BUY  TDB976 1500+10,000= 11,500X50%=5750 SELL  MFC1564 1000+10,000= 11,000 X50%= 5500 BUY  TDB652 4000+10,000=14,000X50%=7000 BUY  CIB519 500+10,000= 10,500X50%=5250 BUY  

7. Assume that Sylvester has a marginal tax rate of 30.5% - what tax impact would result (rounded to the nearest dollar) from the transactions recommended in #6 26,000 X 30,5%= 7930  CIB476 8250-7930= $320 No tax consequence  CIB511 8250-7930= $320 No tax consequence  MAW307 8000- 7930= 70 No tax consequence  TDB976 5750-7930= -2180 tax consequence  MFC1564 5500 – 7930= -2160 tax consequence  TDB652 7000-7930= -930 tax consequence  CIB519 5250 – 7930= -2680 tax consequence...